The Federal Reserve is getting ready! : LUSENET : TimeBomb 2000 (Y2000) : One Thread


"U.S. Financial Data" Cover page December 2, 1999

The Federal Reserve System has anticipated a sharp upswing toward the end of the year in the demand for currency. Although currency demand usually picks up appreciably during the Christmas season, this year's increase is expected to be greater than usual because of the so-called "Y2K effect." Because the Fed has agreed to meet this increased demand, growth of the monetary base--what the textbooks refer to as "high-powered" money--and the M1 monetary aggregate will accelerate. The process works as follows.

An increase in currency supplied to depository institutions (DIs) increases their vault cash, and thus both adjusted reserves and the adjusted monetary base (AMB). Growth of total vault cash at DIs has accelerated dramatically recently, up 17.7 percent in November from a year earlier based on preliminary data (versus 0.5 percent growth between November 1997 and November 1998). This development helps to explain why AMB growth has accelerated since August. Little of this new vault cash is being used to satisfy reserve requirements; most of it is "surplus."

To date, growth of currency outside of DIs has accelerated modestly: After increasing 8.4 percent between November 1997 and November 1998, currency has grown 10.4 percent for the average of the four weeks ending on Nov. 22 from the same period a year earlier. The growth rates of M1 and M2 have not accelerated like the AMB's rate. But if the public becomes very hungry for currency later this month, then M1 and M2 growth will increase sharply. Regardless, this phenomenon is expected to be temporary, with no lasting consequences for money growth, and hence inflation.

-- Hawthorne (, December 11, 1999


"Regardless, this phenomenon is expected to be temporary, with no lasting consequences for money growth, and hence inflation."

Regardless? Regardless of the fact that the FED has been pumping money into the system like a 50 year old degenerate gambler pumping dollars into a Vegas slot machine? Regardless of the fact that commodities prices are flying through the roof? Regardless of the fact that the public will likely panic in the last week of this year causing shortages and hyperinflation? Regardless of the fact that the stock market's market cap's are larger than the known universe of stars? This shit is unfathomable.

And Bob Bennett should please be deeply ashamed of himself for snowing the American people and lacking the moral fortitude to maintain his stance on Y2K. Al Greenspan should be ashamed of himself for using Y2K as an excuse to extend the bubble he created through excessive credit and lack of moral fortitude. And Clinton should just plain be ashamed of himself period. His legacy is shit at this point and will eventually be known as the presidency that helped sink this great country.

-- Gordon (, December 11, 1999.

The Fed is temporarily expanding liquidity and has recently relaxed the rules for using repurchase agreements to provide further liquidity to banks in need during adverse credit market conditions. The expansion of bank reserves using repurchase agreements is not inflationary, assuming there is a repurchase several months later. It's interesting that the Fed has relaxed rules to increase allowable repurchase agreement maturities up to 90 days (was previously 60 days) -- when 60 day repos seemed long enough to cover liquidity problems from a "three-day-storm".

-- Richard Greene (, December 11, 1999.

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